CMC Markets | Jul 07, 2016 10:25
Last night’s rebound in US markets has filtered through into a positive open for European markets today, after three days of declines with the recovery being led by a rebound in the sectors that have been hit the hardest over the past few days. The published minutes of the most recent FOMC meeting showed that US policymakers remain divided over a wide range of factors relating to the US economy and the timing of a rate rise, which would seem to suggest that a rate rise remains some way off.
After three days of sharp declines we’ve seen a slightly firmer tone amongst some of the biggest fallers over the last few days.
While we’ve seen further suspensions of commercial property funds in the past 24 hours this is merely an acknowledgement of the inevitable after the ball started rolling with Standard Life (LON:SL) earlier this week. Ultimately it was always going to be difficult to pay out quickly on what are to all intents and purposes are very illiquid assets. After all it’s not as if you can quickly offload a skyscraper or a shopping centre at the drop of a hat.
The best performers today include real estate giants British Land (LON:BLND) and Land Securities (LON:LAND) while house builders have also rebounded with Persimmon (LON:PSN) and Barratt Developments (LON:BDEV) higher after the latest house price index from Halifax showed prices in June rose 1.3% on a month on month basis.
On the retail front it’s been a mixed picture with Marks and Spencer’s (LON:MKS) latest trading update showing an 8.9% fall in clothing sales in the first quarter. Even the company’s food division saw a 0.9% fall in like for like sales, with new CEO Steve Rowe warning that consumer confidence was a little on the weak side.
On the flip side Primark owner Associated British Foods (LON:ABF) rose sharply this morning after reporting a 7% rise in sales and that it remained optimistic about the UK economy and that it was sticking to its plans to extend its stores footprint across Europe and the US as well.
The pound has stabilised just below the $1.30 level against the US dollar but on a trade weighted basis still remains above the lows that we saw in 1995 as well as at the end of 2008 at the height of the financial crisis. The latest manufacturing and industrial production numbers for May came in slightly better than expected, while the April numbers saw some nice upward revisions, helping boost the annualised headline number, painting a slightly more positive picture of the performance of the sector for Q2.
US markets look set to carry on the positive tone of yesterday ahead of today’s latest ADP payrolls number. As a leading indicator for tomorrow’s US payrolls number it is generally about as reliable as a chocolate teapot, however in terms of the overall trend for jobs growth it has been notable that the ADP numbers have consistently borne little relation to the official numbers for a quite a few months now.
Expectations are for a gain of 158k jobs, down from May’s 173k as investors continue to worry that the US labour market maybe about to show signs of a slowdown. Weekly jobless claims are expected to come in little changed at 269k.
The Dow Jones is expected to open 42 points higher at 17,960
The S&P500 is expected to open 5 points higher at 2,104
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Written By: CMC Markets
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